BP Spill Claims Administrator Cleared in Ethics Probe

The administrator of BP Plc (BP/)’s
$9.6 billion partial settlement of claims from the 2010 Gulf of
Mexico oil spill didn’t engage in any misconduct, an independent
investigation found.

Louis Freeh, former director of the Federal Bureau of
Investigation, said he had “not found evidence” that Patrick
Juneau, the claims administrator, “engaged in any conflict of
interest, or unethical or improper conduct.”

Freeh said that while he found “problematic” conduct by
certain claims-administration employees, it shouldn’t stall
processing payments to spill victims.

U.S. District Judge Carl Barbier in New Orleans appointed
Freeh to investigate allegations of misconduct after a lawyer at
the Deepwater Horizon Court Supervised Settlement Program was
suspended for allegedly taking payments from law firms while
processing their clients’ spill-related claims. A second
attorney was later suspended following similar accusations.

Two claims fund attorneys “may have violated federal
criminal statutes regarding fraud, money laundering, conspiracy
or perjury,” Freeh said in his 93-page report issued yesterday.
This alleged misconduct “should not prevent” the claims
program from “fairly and efficiently processing and paying
honest and legitimate claims,” he said.

BP faces thousands of lawsuits over damages caused by the
explosion and sinking of the Deepwater Horizon rig in 2010. The
blast killed 11 workers and released more than 4 million barrels
of crude from BP’s well off the Louisiana coast.

$9.6 Billion Accord

BP reached the agreement with most private-party plaintiffs
last year, initially estimating the cost of the settlement at
$7.8 billion. The company has since raised the estimate to $9.6
billion.

“Judge Freeh’s initial investigation report confirms what
BP has suspected for some time: there has been fraud and
unethical conduct within the facility itself and among various
claimants and their lawyers –- and immediate steps need to be
taken to prevent it in the future,” Geoff Morrell, a spokesman
for the London-based company, said yesterday in an e-mailed
statement.

“Judge Freeh has confirmed that ‘many’ of the court-supervised settlement program’s ‘key executives and senior
attorneys’ engaged in ‘pervasive’ improper and unethical
conduct, some of which may have been criminal,” Morrell said.

Morrell also cited the finding that the claims center’s key
fraud-detection vendor was “ineffective and had conflicts of
interest.”

Juneau Validated

Juneau said in an e-mailed statement that he “found the
Freeh report to validate the work that our team of 2,700 hard
working professionals has been doing” since the claims center
was created.

Calling the actions of the two former employees “an
isolated situation” that has already been addressed, Juneau
said Freeh found “no evidence that the two employees directly
manipulated the valuation of claims” or that the overall
payment of claims was affected by the misconduct.

In a ruling summarizing Freeh’s findings, Barbier ordered
the attorneys and law firms singled out for improper conduct to
show why they shouldn’t be disqualified from participation in
the claims program within two weeks.

Barbier asked Freeh to evaluate the claims administration’s
“internal compliance program and anti-corruption controls” and
recommend improvements that will “ensure the integrity” of the
process.

The judge also asked Freeh to refer his findings to
government authorities and initiate legal action to “claw
back” fraudulent payments, so long as that effort doesn’t delay
or impede payment of legitimate claims.

Integrity, Transparency

“We are pleased -– but not surprised -– that Judge Freeh’s
report confirmed what we knew to be true all along: that Patrick
Juneau has, for more than a year, led the court-supervised
settlement program with integrity, transparency and
objectivity,” Steve Herman and Jim Roy, co-lead attorneys for
the committee leading the spill litigation, said in an e-mailed
statement.

BP has repeatedly urged Barbier to suspend payments by the
claims administration while it investigates allegations of
widespread fraud and misconduct by employees and certain types
of businesses claiming economic losses from the spill. The
company established a fraud hot line and encouraged Gulf Coast
residents to report suspected ethical violations in the claims
program.

Inflated Cost

Barbier refused to halt payments during Freeh’s probe or
while BP appeals a policy decision it claims is wrongly
inflating the cost of the settlement. BP claims Juneau is
misinterpreting the deal in a way that is causing millions of
dollars to be paid to businesses that suffered no spill-related
losses.

Lawyers for spill victims contend BP is experiencing
“buyer’s remorse” and trying to renegotiate a deal that is
proving more costly than it anticipated.

The U.S. Court of Appeals in New Orleans heard arguments in
BP’s appeal of Juneau’s policy interpretation in July and hasn’t
ruled on it.

In a separate appeal, in which spill victims are
challenging the settlement as unfair, BP said in court filings
that Barbier’s approval of the settlement and certification of
the group of victims allowed to participate in the deal “cannot
stand” unless the Juneau dispute is resolved in the company’s
favor.

The appellate court expedited consideration of that
fairness appeal yesterday, tentatively setting oral arguments
for the week of Nov. 4.

The case is In re Oil Spill by the Oil Rig Deepwater
Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S.
District Court, Eastern District of Louisiana (New Orleans).